UPDATE 1-Estonian economy shrinks more than expected in Q1

TALLINN, May 12 Estonia's economy shrank by 1.9
percent in the first quarter from a year before, its first
quarterly contraction since 2010, as trade, logistics and the
energy sector all proved weak, the statistics office said on
Monday.

The preliminary reading was worse than forecast and followed
a 0.3 percent expansion in the final quarter of 2013. Low growth
and recession among Estonia's main trading partners Sweden and
Finland has dragged on the economy.

"Although our estimate was for a mild recession in the first
quarter ... mainly due to a decrease in exports and an increase
in the foreign trade deficit, this decline in GDP was a bad
surprise," Swedbank Estonia chief economist Tonu Mertsina said.

In seasonally adjusted terms, the economy contracted by 1.2
percent in the first quarter compared with 0.2 percent growth in
the fourth quarter of 2013, preliminary figures from the
statistics office showed.

Estonia's economy last shrank four years ago, when a first
quarter contraction of 3.6 percent in Q1 2010 marked the final
stage of a deep recession. Estonia enjoyed buoyant growth until
the start of 2013 and has expanded only slowly since then.

The statistics office said on Monday that transport and its
associated warehousing sector had been weak in the first
quarter. The relatively warm winter also reduced local energy
production while imports of cheaper Nordic power increased.

Estonia's banking sector is more than 90 percent owned by
the Nordic banking groups like SEB, Swedbank
and Nordea and the small, open euro zone
economy is strongly affected by global economic trends.

The finance ministry said in April it expected economic
growth of 2.0 percent this year.

(Reporting by David Mardiste; Editing by Catherine Evans)

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